US Airways Processor

The U.S. Bankruptcy Court of the Eastern District of Virginia for Alexandria has given US Airways 45 days to finalize an agreement with a new credit card processor. The bankrupt airline says it has several banks interested in taking over the processing of its credit card transactions. The airline’s current processor, National Processing, has given it a March 31st deadline to emerge from reorganization or face termination. In May 2002, National Processing announced its decision to discontinue processing debit and credit card transactions for all its airline clients. The Company will honor its existing contractual obligations to the airlines it currently serves but does not intend to renew such contracts when their current terms expire. The contracts currently in effect have various expiration dates extending through November 2005. (CF Library 5/30/02; 2/27/03)

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PCMCIA READER CERTIFIED

EMVCo has awarded its first level one certification for a PCMCIA reader. Ismaning-based SCM Microsystems has successfully passed all EMVCo level one tests for its “SCR241” smart card reader. SCM also participates in the “smart VISA Ready” program. The “SCR241” PCMCIA reader is one of several SCM readers certified as “smart VISA Ready.” Other certified products are the “SCR331” USB reader, the “SCR131” serial reader, and the “SCR531” USB and serial reader. SCM is also an active participant in the “MasterCard Vendor Program.” EMVCo, LLC, was formed in February 1999 by Europay International, MasterCard International and VISA International to manage, maintain and enhance the EMV smart card specifications for payment systems.

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Spiegel Bankruptcy

Six days after notifying the trustees for all six of its credit card-backed securitizations that an early amortization event had occurred, The Spiegel Group announced yesterday it has filed for a “Chapter 11 Reorganization.” Spiegel also confirmed it has secured a $400 million senior secured DIP financing facility from Bank of America, Fleet Retail Finance, and The CIT Group/Business Credit. In its filing documents, Spiegel listed total assets with a book value of $1.737 billion and total liabilities of $1.706 billion as of February 22nd. Spiegel’s First Consumers National Bank is not part of the filing. The bank is being liquidated under the terms of a preexisting consent order entered into with the OCC last year. Last week Spiegel announced it is no longer honoring the private-label credit cards issued by FCNB to customers of Spiegel’s merchant companies, which include Eddie Bauer, Newport News and Spiegel Catalog. Two weeks ago, FCNB discontinued charging privileges on all MasterCard and VISA bank cards issued by FCNB to its customers. On March 7th Spiegel was sued by the SEC for allegedly violating securities laws by withholding material information from the public. FCNB is the 28th largest bank credit card issuer in the USA, according to CardData ([www.carddata.com][1]), with 1,439,479 accounts; 812,843 active accounts; and, $1,059,783,754 in outstandings, as of 12/31/02. (CF Library 2/22/02; 4/23/02; 8/23/02; 2/25/03; 3/5/03; 3/7/03; 3/11/03; 3/12/03)

[1]: http://www.carddata.com

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53 Rewards

Fifth Third Bank announced Monday that all existing and new debit cardholders are now eligible to join the Fifth Third debit MasterCard card rewards program. In addition, the bank is launching the new “Fifth Third Cash Rewards MasterCard” credit card. Last year, Fifth Third launched a loyalty programs to reward both credit card and debit card use. Under the rewards program, debit cardholders earn one point for every $2 in purchases. Under the new credit card program cardholders earn one percent cash back for each $1 in purchases made, with a “Cash Rewards” check issued for every $5,000 in purchases made, up to $50,000 in purchases annually. Cardholders using their traditional Fifth Third select, gold or platinum credit MasterCard cards earn one point for each $1 in purchases. Using their traditional Fifth Third credit MasterCard card, and/or debit MasterCard card, participating cardholders can earn up to 60,000 points annually, with graduated redemption opportunities starting at 3,500 points.

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CARD PROBLEMS

The South Korean government yesterday announced it will relax regulations
on credit card issuers and may buy bad debt from issuers to help issuers
survive. The payment card industry has been hit with high loss rates and an
accounting scandal at SK Group which has forced credit card-backed bond
yields to surge. Card payments 30+ days overdue increased 23% to 8 trillion
won in January from 6.5 trillion won in December. Credit card issuers lost
a total of 261.6 billion won in 2002. In January, credit card losses topped
412.8 billion won. To deal with the rising delinquency problem, the South
Korean government will extend the maximum maturity date of the loans
provided to delinquent credit-card users from the current 1 to 3 years to 5
years. The Ministry of Finance and Economy, the Financial Supervisory
Service, and the Bank of Korea said credit card issuers will also require
credit card companies to reduce operating expenses and boost capital. Some
card issuers have indicated they will reduce grace periods from 40 days to
25 days, and drop zero percent interest rate offers. The FSS says eight
card companies have plans to raise about 2 trillion won through rights
offerings, or by issuing subordinated bonds. However, the Korea Non-Bank
Financing Association said some card issuers might still face bankruptcy.

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MBNA Stats

MBNA reported yesterday that its managed charge-off rate for credit card loans declined from 5.15% in January to 5.10% for February. However, the delinquency rate (30+ days) inched up from 4.85% to 4.91% during the same period. MBNA said there was some concern when it reported its January data. MBNA explained that the typical seasonal increase in loss rates in January was due, in large part, to a “denominator impact”, as MBNA’s loan outstandings build up over the holiday shopping season and then decline after year-end. This year’s increase, on a managed basis, from December to January was 41 basis points as a result of normal seasonal trends and also the current economic environment, compared to an average increase of 39 basis points on a managed basis over the three year period. MBNA says it expects a further decline in managed net credit loss rates in March. For complete details on MBNA’s latest statistics visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com

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SMART ID CARD

The Ministry of Interior of the United Arab Emirates and SAGEM have signed
a contract worth over US$50 million for the project management, design,
integration and deployment, over 22 regional centers, of a system which
will control the issuance, production and use of several million electronic
identity cards for citizens and residents. The UAE becomes the twelfth
country to have chosen an integrated management solution with ID documents
secured by SAGEM. SAGEM’s solution integrates the latest technologies
available (smart card with crypto-processor, highly secure architecture,
internal biometric identity check feature, JAVA multi-application platform,
Public Key Infrastructure, certificates).

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POLYMER BANKNOTES

Ottawa-based Canadian Bank Note Company has signed a contract with the
Bank of Zambia for the printing and supply of two denominations of Kwacha
banknotes to be printed on a high security polymer substrate. This contract
marks the first polymer banknotes to be issued in Africa. Australia and New
Zealand were the first countries to adopt polymer for all their banknotes.
Polymer banknote substrate is a uniquely manufactured and coated, thin,
resilient plastic material that offers a significantly longer circulation
life for banknotes than traditional paper-based notes. These banknotes
deliver enhanced security, cleanliness and offer a significant reduction in
the costs associated with the issuing, inspection and withdrawal of
banknotes from circulation.

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